INTERNATIONAL BUSINESS

INTERNATIONAL BUSINESS; Lloyd's Says It's Optimistic for Long Term

By RICHARD W. STEVENSON

Published: April 25, 1995

LONDON, April 24—
Faced with renewed questions about its financial viability, the Lloyd's of London insurance market said today that it would come under severe strain this year but that its long-term outlook was cautiously optimistic.

Lloyd's was responding to a spate of news reports here in recent days suggesting that the venerable insurer would not be able to meet British Government requirements for financial strength later this year and could be put out of business.

Lloyd's, an amalgamation of insurance brokers and underwriters that has been one of the pillars of the British financial establishment since its founding more than three centuries ago, said it had "utter confidence" in its ability to weather its problems.

Next month Lloyd's is expected to report a loss for its 1992 accounting year of at least $:1.3 billion, or more than $2 billion. Lloyd's reports its results after a three-year lag to allow time for insurance claims to be processed and settled. Lloyd's lost $:6.7 billion, or about $10.7 billion, between 1988 and 1991.

But Lloyd's says that it expects results for 1993 and 1994 to show a strong return to profitability and that the signs are encouraging for a profitable 1995. Lloyd's is benefiting from higher insurance rates, lower costs and a relative absence of natural disasters of the sort that prompt huge insurance claims.

In a statement from its chairman, David Rowland, Lloyd's said that it expected to meet all required solvency standards this year. The standards are a measure of its ability to pay all claims from policyholders.

Mr. Rowland's statement was originally scheduled to be released later this week, but was sent out today after a series of newspapers questioned whether Lloyd's could survive the year because of its losses and the inability of its investors to cover them. The newspaper reports threatened to start a crisis of confidence about Lloyd's.

Lloyd's is locked in a battle with the individual investors who put up the funds used to back the policies sold through the market. Because of the huge losses run up by Lloyd's in the last several years, many of those investors, known as "names," have been left broke and unable to cover any additional losses.

Reports that Lloyd's is on the brink of collapse have generally been emanating from disgruntled names, who have been engaged in a high-stakes negotiation with Lloyd's over how much of the past and future losses they will have to bear.

Matt Huber, a spokesman for Lloyd's, said the institution expected to make a settlement offer to the names at the end of May. A previous offer was rejected by names last year. Some names have sued Lloyd's, contending fraud and mismanagement, and many more are expected to bring legal proceedings, potentially crippling the institution by keeping it tied up in court for years, if the two sides cannot reach a deal.

Lloyd's has sought, with some success, to replace individual names with corporate investors, allowing it to retain its underwriting capacity.

"In drawing up our accounts we are required to satisfy ourselves that we are a going concern, able to trade through to the better times that are coming," Mr. Rowland said in his statement. "On the basis of our progress to date, our knowledge of the substantial profits already earned in the 1993 and 1994 accounts, and of the proposals we are considering, we are so satisfied."